July 16, 2010

The Economic Crunch We're in: Corporations Want Fewer Workers, But They Still Need Everyone to Be Consumers

The recession has been a way for employers to cull payrolls -- and to discover that many jobs don't have to be filled again.

July 15, 2010 |

The hard truth about the U.S. economy is that corporations don’t need as many of us as workers but still need us as consumers. That dilemma helps explain why unemployment is stuck near 10 percent and why the economic recovery is stumbling toward a double dip.

The Washington Post reported Thursday that nonfinancial companies are sitting on $1.8 trillion - about one-fourth more than at the start of the recession - but won't add personnel in part because they're waiting for consumer demand to pick up, which isn't happening because many Americans don't have jobs or are afraid of losing theirs.

Yet, even if that vicious cycle could be broken, there's another reason for the lack of hiring: companies have found they can make do with a lot fewer American workers. The recession has been a way to cull payrolls - and to discover that many jobs don't have to be filled again, either because of new technologies or because the jobs have been shifted overseas.

Both these trends predated the recession but the rapid shedding of jobs since the Wall Street financial crash in 2008 - some eight million jobs lost - has spotlighted this structural change. Further, corporate determination to remain "lean" has turned the worker-surplus issue from a personal crisis for many American families into a systemic one for the country's economy.

Predictably, the free-marketers at CNBC and the Wall Street Journal have echoed the political message of the Chamber of Commerce and other right-wingers who blame the sluggish rehiring on the Obama administration's health-care reform and the likelihood that President George W. Bush's tax cuts for the rich will lapse.

That view fits with Ronald Reagan's economic orthodoxy which has dominated the United States for the past three decades. It holds that the answer to the nation's economic woes is always to cut taxes especially for the rich, to trust in corporate self-regulation, and to crack down on unions.

Yet, the realistic answer to America's sorry economic state would seem to be the opposite: to raise taxes on the rich so investments can be made in the national infrastructure of education, transportation and technology; to impose reasonable regulations on corporations to prevent dangerous excesses and risks; and to ensure that workers (and consumers) get a fair shake.

Through the federal taxing power, Washington could put Americans to work preparing the nation for the future, building high-speed rail, developing clean energy, improving education for all, advancing medical technologies, repairing the environment, and addressing a host of other national priorities.

The Media Imbalance

But a second hard truth about today's America is that the political/media structure is such that these steps are almost unimaginable. In the power centers of New York and Washington, in particular, Corporate America and its right-wing allies have built a propaganda apparatus that makes any serious discussion of these options political suicide.

This propaganda machinery, which reaches across the United States through right-wing talk radio, Fox News and a variety of other outlets, guarantees that any politician (or media personality) who pushes too hard or too effectively for questioning the Reagan orthodoxy will be demonized.

President Barack Obama is only the latest politician to learn this lesson. Though many on the American Left denounce Obama as a weak-kneed centrist too eager to compromise, he is portrayed to the rest of America as a radical socialist, sometimes even likened to Hitler and Stalin.

It doesn't matter that these comparisons are as absurd as they are offensive. The point about propaganda is that if ugly attacks are repeated enough about some individual, many in the public will be influenced, consciously or subconsciously, to think of the person in a negative light.

And as that trend gains momentum - as the politician's polls sink - the mainstream media will go with the flow, endlessly reprising stories about the person's slipping popularity and thus hastening the political decline.

This pattern is almost inevitable unless there is a counterforce within the media that challenges the lies and distortions. But today's America has almost no Left media to speak of, at least nothing that compares with what the Right has built, and what Left media does exist tends to resent the political compromises that Obama and other Democrats have made.

Thus, the media asymmetry causes Democratic politicians to make more compromises, hoping to limit the Right's ability to demonize them but further alienating and demoralizing the Democratic base.

So, the outcome of Election 2010 seems likely to follow the same course as Election 1994, the last time a new Democratic president was in office and tried to enact some watered-down reforms. Again, Republicans are expected to win - and win big - which would then put them in position to block whatever is left of Obama's agenda and thus turn him into an actual (or virtual) lame duck.

Though Bill Clinton did win reelection in 1996 against a weak Republican opponent (Bob Dole) with the help of a third-party candidate (Ross Perot), Clinton had to confine his second-term ambitions to "micro-programs" and to changes favored by the Republicans, such as the removal of Great Depression-era regulations of the banking system (a "modernization" that set the stage for the 2008 financial collapse).

Investigating Obama

If Republicans gain control of at least one house of Congress, they would surely launch a wave of investigations against Obama, much as the GOP did against Clinton.

Unlike the Democrats who shy away from investigative controversies - turning their backs even on historic scandals such as Iran-Contra, Iraq-gate and contra-cocaine trafficking in the 1980s as well as George W. Bush's torture abuses and illegal wars last decade - the Republicans have no such qualms.

They pounced all over trivial Clinton "scandals" like Whitewater and Travel-gate and impeached Clinton for lying about sex (though they could not muster a super-majority in the Senate for conviction). And Rep. Darrell Issa, R-California, has vowed to be similarly aggressive now if he gains control of the House oversight committee next year. [Washington Post, July 4, 2010]

So, with Obama embattled and the Democratic congressional majorities likely to shrink or disappear, the chances for the United States to confront its structural problems will only worsen.

With unemployment staying high, many middle-class Americans will sink into a growing under-class. The rich will fight to keep as much of their oversized salaries and bonuses as possible, with the Republicans ensuring that the one political sure-thing will be that legislated tax increases won't happen.

Indeed, the simplest way to address the nation's myriad of problems - by restoring the marginal tax rates for the rich back to the historical levels of, say, the Kennedy era (around 60 percent on their top income) - is the one thing that is almost impossible to contemplate.

Since Reagan's presidency, the Republicans have been determined to "starve" the government of resources so it can't address problems like climate change, renewable energy, education, transportation, health care, housing, etc. The only big expenditure that the GOP won't cut is military spending, especially for overseas wars.

Though the Republican vision of the future appears to guarantee a continued decline in the quality of American life, the Right's propaganda machinery makes any suggestion about the need to tax the rich more heavily akin to socialism. The Revolutionary War slogan, "no taxation without representation," has been transformed to something close to "no taxation, period."

Remember the famous encounter between candidate Obama and "Joe the Plumber," who decried Obama's idea about the need to redistribute wealth from the upper-income levels to middle- and working-class Americans so the economy would work better.

That debate remains at the center of America's economic struggles, as it has been since the Great Depression when income inequality and financial speculation were two key factors in the mass unemployment that followed the Crash of 1929. Two lessons learned were that a strong middle class and reasonable government regulations were necessary for a healthy economy.

New Consensus

That New Deal consensus held until 1980 when a new Reagan-era consensus took hold, claiming that tax cuts tilted toward the wealthy and reduced regulation of corporations were the route to prosperity. A corollary was that the wealthy deserved the lion's share because of their intelligence and hard work.

Reagan and the Right sold many Americans, including large numbers of people from the lower economic strata, on the idea that it was unfair for the government to use the tax system to reverse the consolidation of wealth and the political power that went with it.

However, the counter-argument is that virtually every rich person in the United States has benefited from the investment of taxpayers' money in creating the conditions for business success, from public education of workers, to the transportation infrastructure for shipping goods, to the research and development that opened opportunities in computer technology, medicines and the Internet.

Indeed, to ensure that the benefits from these government investments are shared with some equity would require that the excess income at the top be recycled into other improvements of the nation's infrastructure and the quality of life for all Americans.

In other words, by raising taxes on the rich, Washington could help create the jobs needed for addressing national problems and simultaneously break the vicious cycle that has left nearly 10 percent of Americans unemployed, the key fact that has depressed consumer demand.

However, to change the dominant Reagan-era ideology - and thus to change America - would require smart investments from progressives in the information battles for the hearts and minds of the American voters.

Only with the Right's orthodoxy challenged and the American people understanding their real choices might politicians gain the confidence and courage to do what's needed to get the United States back on the path of a healthy economy - and toward a revived democracy.

Comments

The recession has been a way for employers to cull payrolls -- and to discover that many jobs don't have to be filled again.

July 15, 2010 |

The hard truth about the U.S. economy is that corporations don’t need as many of us as workers but still need us as consumers. That dilemma helps explain why unemployment is stuck near 10 percent and why the economic recovery is stumbling toward a double dip.

The Washington Post reported Thursday that nonfinancial companies are sitting on $1.8 trillion - about one-fourth more than at the start of the recession - but won't add personnel in part because they're waiting for consumer demand to pick up, which isn't happening because many Americans don't have jobs or are afraid of losing theirs.

Yet, even if that vicious cycle could be broken, there's another reason for the lack of hiring: companies have found they can make do with a lot fewer American workers. The recession has been a way to cull payrolls - and to discover that many jobs don't have to be filled again, either because of new technologies or because the jobs have been shifted overseas.

Both these trends predated the recession but the rapid shedding of jobs since the Wall Street financial crash in 2008 - some eight million jobs lost - has spotlighted this structural change. Further, corporate determination to remain "lean" has turned the worker-surplus issue from a personal crisis for many American families into a systemic one for the country's economy.

Predictably, the free-marketers at CNBC and the Wall Street Journal have echoed the political message of the Chamber of Commerce and other right-wingers who blame the sluggish rehiring on the Obama administration's health-care reform and the likelihood that President George W. Bush's tax cuts for the rich will lapse.

That view fits with Ronald Reagan's economic orthodoxy which has dominated the United States for the past three decades. It holds that the answer to the nation's economic woes is always to cut taxes especially for the rich, to trust in corporate self-regulation, and to crack down on unions.

Yet, the realistic answer to America's sorry economic state would seem to be the opposite: to raise taxes on the rich so investments can be made in the national infrastructure of education, transportation and technology; to impose reasonable regulations on corporations to prevent dangerous excesses and risks; and to ensure that workers (and consumers) get a fair shake.

Through the federal taxing power, Washington could put Americans to work preparing the nation for the future, building high-speed rail, developing clean energy, improving education for all, advancing medical technologies, repairing the environment, and addressing a host of other national priorities.

The Media Imbalance

But a second hard truth about today's America is that the political/media structure is such that these steps are almost unimaginable. In the power centers of New York and Washington, in particular, Corporate America and its right-wing allies have built a propaganda apparatus that makes any serious discussion of these options political suicide.

This propaganda machinery, which reaches across the United States through right-wing talk radio, Fox News and a variety of other outlets, guarantees that any politician (or media personality) who pushes too hard or too effectively for questioning the Reagan orthodoxy will be demonized.

President Barack Obama is only the latest politician to learn this lesson. Though many on the American Left denounce Obama as a weak-kneed centrist too eager to compromise, he is portrayed to the rest of America as a radical socialist, sometimes even likened to Hitler and Stalin.

It doesn't matter that these comparisons are as absurd as they are offensive. The point about propaganda is that if ugly attacks are repeated enough about some individual, many in the public will be influenced, consciously or subconsciously, to think of the person in a negative light.

And as that trend gains momentum - as the politician's polls sink - the mainstream media will go with the flow, endlessly reprising stories about the person's slipping popularity and thus hastening the political decline.

This pattern is almost inevitable unless there is a counterforce within the media that challenges the lies and distortions. But today's America has almost no Left media to speak of, at least nothing that compares with what the Right has built, and what Left media does exist tends to resent the political compromises that Obama and other Democrats have made.

Thus, the media asymmetry causes Democratic politicians to make more compromises, hoping to limit the Right's ability to demonize them but further alienating and demoralizing the Democratic base.

So, the outcome of Election 2010 seems likely to follow the same course as Election 1994, the last time a new Democratic president was in office and tried to enact some watered-down reforms. Again, Republicans are expected to win - and win big - which would then put them in position to block whatever is left of Obama's agenda and thus turn him into an actual (or virtual) lame duck.

Though Bill Clinton did win reelection in 1996 against a weak Republican opponent (Bob Dole) with the help of a third-party candidate (Ross Perot), Clinton had to confine his second-term ambitions to "micro-programs" and to changes favored by the Republicans, such as the removal of Great Depression-era regulations of the banking system (a "modernization" that set the stage for the 2008 financial collapse).

Investigating Obama

If Republicans gain control of at least one house of Congress, they would surely launch a wave of investigations against Obama, much as the GOP did against Clinton.

Unlike the Democrats who shy away from investigative controversies - turning their backs even on historic scandals such as Iran-Contra, Iraq-gate and contra-cocaine trafficking in the 1980s as well as George W. Bush's torture abuses and illegal wars last decade - the Republicans have no such qualms.

They pounced all over trivial Clinton "scandals" like Whitewater and Travel-gate and impeached Clinton for lying about sex (though they could not muster a super-majority in the Senate for conviction). And Rep. Darrell Issa, R-California, has vowed to be similarly aggressive now if he gains control of the House oversight committee next year. [Washington Post, July 4, 2010]

So, with Obama embattled and the Democratic congressional majorities likely to shrink or disappear, the chances for the United States to confront its structural problems will only worsen.

With unemployment staying high, many middle-class Americans will sink into a growing under-class. The rich will fight to keep as much of their oversized salaries and bonuses as possible, with the Republicans ensuring that the one political sure-thing will be that legislated tax increases won't happen.

Indeed, the simplest way to address the nation's myriad of problems - by restoring the marginal tax rates for the rich back to the historical levels of, say, the Kennedy era (around 60 percent on their top income) - is the one thing that is almost impossible to contemplate.

Since Reagan's presidency, the Republicans have been determined to "starve" the government of resources so it can't address problems like climate change, renewable energy, education, transportation, health care, housing, etc. The only big expenditure that the GOP won't cut is military spending, especially for overseas wars.

Though the Republican vision of the future appears to guarantee a continued decline in the quality of American life, the Right's propaganda machinery makes any suggestion about the need to tax the rich more heavily akin to socialism. The Revolutionary War slogan, "no taxation without representation," has been transformed to something close to "no taxation, period."

Remember the famous encounter between candidate Obama and "Joe the Plumber," who decried Obama's idea about the need to redistribute wealth from the upper-income levels to middle- and working-class Americans so the economy would work better.

That debate remains at the center of America's economic struggles, as it has been since the Great Depression when income inequality and financial speculation were two key factors in the mass unemployment that followed the Crash of 1929. Two lessons learned were that a strong middle class and reasonable government regulations were necessary for a healthy economy.

New Consensus

That New Deal consensus held until 1980 when a new Reagan-era consensus took hold, claiming that tax cuts tilted toward the wealthy and reduced regulation of corporations were the route to prosperity. A corollary was that the wealthy deserved the lion's share because of their intelligence and hard work.

Reagan and the Right sold many Americans, including large numbers of people from the lower economic strata, on the idea that it was unfair for the government to use the tax system to reverse the consolidation of wealth and the political power that went with it.

However, the counter-argument is that virtually every rich person in the United States has benefited from the investment of taxpayers' money in creating the conditions for business success, from public education of workers, to the transportation infrastructure for shipping goods, to the research and development that opened opportunities in computer technology, medicines and the Internet.

Indeed, to ensure that the benefits from these government investments are shared with some equity would require that the excess income at the top be recycled into other improvements of the nation's infrastructure and the quality of life for all Americans.

In other words, by raising taxes on the rich, Washington could help create the jobs needed for addressing national problems and simultaneously break the vicious cycle that has left nearly 10 percent of Americans unemployed, the key fact that has depressed consumer demand.

However, to change the dominant Reagan-era ideology - and thus to change America - would require smart investments from progressives in the information battles for the hearts and minds of the American voters.

Only with the Right's orthodoxy challenged and the American people understanding their real choices might politicians gain the confidence and courage to do what's needed to get the United States back on the path of a healthy economy - and toward a revived democracy.